After a bit of a dip, iron ore prices are on the rise as Chinese steel production begins to increase again and the world’s top diversified miners will be the likely principal beneficiaries.
LONDON (MINEWEB) – It should not have escaped anyone who follows the global mining sector’s attention that the world’s three biggest mining companies by a long way, BHP, Rio Tinto and Vale, are also the three biggest miners of high grade iron ore.
There had been much discussion of how these would fare in a Chinese downturn, given that China is by far the world’s largest importer of iron ore and there was comment that iron ore prices would fall dramatically, thus decimating the big three’s revenues and profits – exacerbated perhaps by the fact that they are all growing production with the inevitable additional costs that involves.
What the observers seemed to have failed to take into account is that China, in a recession, is still the equivalent of anyone else in a mega growth phase! Growth falling perhaps from 10% plus per annum to maybe 6 or 7% – figures western economies would give their eye teeth for!
Now, Germany’s Commerzbank tells us that the price of iron ore landed at the Chinese port of Tianjin appears to be capable of going in only one direction at the moment – upwards. Yesterday it achieved $142.8 per ton, its highest level in five months and the mega miners will be benefitting accordingly given they control the huge bulk of seaborne iron ore trade.
It is also why the next mining company in line, Anglo American, although a significant iron ore miner in its own right through Kumba, has been desperately trying to raise its iron ore production profile through the seemingly badly timed, and financially draining, Minas Rio acquisition in Brazil and why companies are keen to spend huge sums on infrastructure to develop mega iron ore deposits like Simandou in Guinea.
As Commerzbank further points out, since the beginning of the third quarter, the iron ore price has already gained 23% or $26 with China, in its downturn, still producing a great deal of steel. According to figures quoted by the bank from China’s National Bureau of Statistics, steel production in July totalled 65.5 million tonnes, which is 6.2% up year-on-year. In the first seven months of the year, 455.8 million tonnes of steel were produced, 7.1% more than last year.
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